International Business

 

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Introduction

Increasing internationalization and globalization has become of great significance recently.  The number of organizations operating internationally is increasing constantly and more and more organizations are focusing on overseas to grow their businesses, as the globe becomes more and more unified.  According to Keillor, (2013), the world continues to open up for foreign companies, and new business destinations are increasing.  The global economy has created business environments, which require organizations to look beyond the traditional view of the home-market, and instead, begin looking at businesses from a global perspective.  Due to high competition, organizations operating abroad face a much bigger task than before.  When going global, the challenges an organization must handle are unfamiliar and new.

Culture is among these obstacles, which affect the operation of a business in a global context. Cultural changes occur very slowly, and their effects endure for many years.  Even with the technological advancement in communication and travel, cultural behaviors within societies have remained practically unchanged. The fixed nature of culture is usually a mechanism in which a society can protect its principles, and guard against external influences.  Thus, international businesses have to deal with diverse cultures in different nations; and companies operating in many countries, must understand, learn and use these cultural divergences in their strategic action planning (Neelankavil, 2015, p. 39).  As such organizations act commercially in different countries, they should be obligated to adapt to the laws, habits, policies, and the preferences of these nations, as a way to become more successful in a different context.  Amongst the biggest obstacles faced by organizations, which operate in the global market is the cultural divergence.  The aim of this research paper is to examine the cultural environment facing international businesses.

Discussion

In a multicultural society, such as the United States, businesses succeed by finding general grounds across ethnic and cultural groups.  However, in homogeneous cultures such as Asian or European countries, businesses have continued to maintain their local value systems.  The Americans constantly change things – their homes, images, services, products and how they do things.  To them, change is significant; change is improvement. However, the Asian and European cultures do not easily discard their proud and long histories.  They believe that an established manner of doing things is a virtue, not a weakness.  In the field of international business, we have been seeing the emergence of multicultural deals that could correctly be called global.  This shows that countries are more closed to one another, and they are needed to create a synergistic strategy to incorporate the needs of the nations.

Cross-cultural management researchers have recognized that cultural differences across nations can have significant implications for managers. There are various models that study the role of culture within international organizations.  Of these models, the most common model is Hofstede’s (1980) who continues to enjoy the most popularity in the cross-cultural management sphere.  This is because the model was the very first to concentrate on management and provide statistical indicators for different countries, facilitating its application in empirical study of cultural influences on management behaviors.  For instance, some authors have focused on the cultural variations among countries and recognize that the level of difference is expected to have a great impact on an international business.  Other scholars who reviewed 180 studies suggested that cultural values are associated with conflict managements, change management, leadership, Human Resource Management, work-related attitudes, reward allocation, personality, and individual behavior (Feldman, Santangelo, & European International Business Association, 2008, p. 44).

Cross-cultural management is clearly significant and has a high influence on the success of global business operations.  It has been reported that global business management is indivisible from the field of patterned cultural behaviors since culture is characterized in terms of the shared and pervasive beliefs, values, norms and symbols, which guide the daily lives of diverse groups of people.  The traditional strategies applied by management to control culturally diverse workers have proved inadequate and might be unable to solve the challenge of cross-cultural diversity through the era of globalization.

The demographic movements, technological innovations, economic and political forces have revolutionized over time, and continue to transform human behavior.  In conducting business globally, cultural barriers tend to increase and present new opportunities, and challenges as well.  In today’s increasingly demanding and competitive global free market economy, managers cannot succeed exclusively on their domestic cultural skills only.  The cultural environments of international businesses focus on how cultural diversities across regions and nations can influence the manner in which international and national business are transacted.  For instance, what it is about a certain culture that either inhibits or facilitates trade, entrepreneurship, and success in international markets; or how culture influences the way in which businesses are organized, manage their workforce, and approach strategic decisions.

Defining Culture

Culture has been defined as the beliefs, knowledge, morals, customs, art and other capabilities of a particular group distinguishing it from others.  This means that culture is the means of a society’s life.  From a practical viewpoint, cultural elements comprises of symbols, behaviors, skills, knowledge, language, motives, traditional ideas, and achievements, which are perpetuated and learned through a society’s establishments to improve its survival opportunities Neelankavil, 2015, p. 39).  It has also been defined as the acquired awareness that individuals use to generate social behavior and interpret experiences.  Since culture entails so many elements, businesses find it very challenging to wholly understand its effects on a society.  Learning new culture means more than mastering some hidden languages of the host country.   It also signifies learning to bridge any differences between cultures in order to create successful relationships.

While culture works on the unconscious level, its effects are subtle.  For instance, one has to be conscious when dealing with German managers that they are cautious about titles and are quite formal in their business talks.   The French are always proud of their language and culture, and for that reason, they are sensitive to matters affecting the cultural environment, particularly in business transactions.  In fact, as cultures appear to be more collective in nature, international organizations sometimes have to manage more than one culture within a single nation.  For instance, various parts of China comprises of multiple cultures that have contrasting cultural differences.  Therefore, diverse layers of culture tend to exist at the regional, national, gender, societal and social class levels.  At the regional level, it has been indicated that cultural settings create limitations and opportunities for people differ from country to country in the same region.  At the country level, studies have shown that cultural principles have important effects on a nation’s economic development, levels of corruption and regulatory policies.  Similarly, at the level of corporate, research findings reveal that culture not only affects the strategic level, but also the management area and its market orientation.

Culture shock – when one enters another culture, he or she will most likely experience culture shock.  This is a normal reaction toward all the differences of a different culture.  A person who experiences culture shock will have a series of reactions starting with excitement, followed by aggravation, then adjustment, and eventually, acceptance.  Thus, it is crucial to do a proper homework in order to understand the culture of an alien country before deciding to do business in that country.

Culture and International Business

The significance of culture to global business cannot be overemphasized.  Whether dealing with matters pertaining to managing, marketing or negotiating business transactions, the achievement or failure of an organization abroad widely depends on how efficiently its workforce can exercise their abilities and skills in a new setting.  That ability depends on their job-related skills, as well as the employee’s responsiveness and sensitivity to the new cultural background.  One of the most known factors that contribute to failure in international businesses is the wrong assumption that if one is successful in home business, then he or she would be equally successful in employing technical knowledge in a diverse culture.  Studies have established that failures in international business environment mostly results from a lack of ability to adapt and understand foreign ways of acting and thinking, rather than from professional or technical incompetence (Ferraro, 2002, p. 17).

Cultural differences are key ingredients in the ‘liability of foreignness,’ a set of challenges that tends to interfere with businesses’ success abroad.  The effects of culture at the company level range from formulation of strategy, to organizational designs.  Culture does not only influence how strategic moves can be presented, but it can impact the decisions themselves, as well.  Organizational behavior processes such as motivation, perception, leadership, human resource management, and communication, are all impacted by culture, as are decision making processes, negotiations and management styles.  Culture plays a vital role in international mergers and alliances, though it has also been found to correlate with entrepreneurial behavior and corruption.

As observed by Huntington, the role of culture cannot be reduced in the international era.  He explains that in this new world, the most important, pervasive and dangerous conflicts are not between the rich and poor, social classes, or other economically-defined groups (Shenkar, Luo, & Chi, 2014, p. 190).  Instead they are between people who belong to diverse cultural entities.  Huntington further observes that culture is both a unifying, as well as, a divisive force.  It is a force that unifies members, though it is also a source of friction among members.  Culture can be a source of inner friction, where stringent adherents tend to struggle with others perceived as straying from or betraying the cultural heritage.

Elements of culture that apply to international business

Some of the vital elements, which help in understanding culture, are norms, values, language, education and religion.

Values

These are ideas that people believe and cherish to be essential.  They are the primary convictions that individuals and groups hold on to concerning what is good or bad, wrong or right.  Values are regarded as the basis of any culture, because it is on these values that the structures of customs, norms, education, and others, are justified and developed.  They tend to differ from culture to culture, usually creating major differences amongst cultures.  In Japanese culture, significance is given to values like honesty and loyalty, and also, to group membership.  For businesses operating in this country, observing these results in greater cooperation employees, highly industrious, and deeply devoted employees.  Some of the fundamental values include leadership, technology, religion, time, and individualism versus collectivism.

Individualism and collectivism

Individualism is the faith in the individual and in his or her ability to function rather independently.  Independence, self-reliance, as well as freedom are closely connected to individualism in the U.S.  However, in many other cultures, individualism is viewed as undesirable.  Most people do not support the negative aspects of selfishness and self-centeredness.  Rather, they prefer collectivism, which is the belief that a group is more vital than the individual.  The Japanese, for example, has a powerful collective orientation.  They rarely make decisions without group agreement or getting consensus (Shenkar, Luo & Chi, 2014).  To them, group harmony is more significant than individual gain.  In contrast, American business-persons tend to operate individually, and often make decisions without having to consult fellow staff.  Individual gain is more significant to them than group harmony.

For international organizations, the individualism-collectivism aspect is a very crucial concern in the management of international operations.  Businesses entering individualistic societies must be aware that individual initiatives should be encouraged, and that individual decision-making is the norm in such countries.  Employees in such countries have a preference for individual rather than group-based reward practices.  Those getting into collectivistic societies should understand that groups are given more value in such countries, and hence, they should be ready to abide by such values.  These entail decision making processes, which should be group-based.  In addition, group performance should be given priority and the organizational structures should reflect a ‘family orientation’.

Leadership and power

Different cultures have diverse values relating to power, leadership and authority.  These are shared amongst a number of different institutions and people in democratic societies.  For instance, in the U.S., the power to rule is divided amongst the executive, judicial and legislative branches of the government.  This means that no group or individual has too much authority. In authoritarian societies, power, authority and leadership are granted to some few people.  In China, for example, the leadership authority and power are given to a few leaders, who govern without queries.

Religion

Religion is an essential element of culture because it influences the beliefs, lifestyles, attitudes, and values of the people. The knowledge of religion is quite significant for a company involved in international business; since it can help the companies understand what type of services or products the locals like. According to Cherunilam, (2010), religious beliefs regulate the conducts of members of different cultural groups, which include business organizations. Such beliefs affect how businesses and people perceive the world.  Some countries and societies are dominated by a distinct religion.  For instance, in the case of Iran, Islam strongly influences the nation.  Every person and business there is subjected to Islamic practices.  Some other countries like in Africa have several major religions, and business people in such countries are expected to respect the values of the various religious practices.  In India, many business decisions are based on astrological advice, which include the decision about the timings of a business launch, name of the firm, location of the company, and brand name.  In other states, such as the UK, religion is not a key social force. According to Dlabay & Scott, (2010), the connection between business and religion is controversial.  They have observed that various religions both discourage and encourage business activities within a country.

Language

There is a strong agreement that among the key elements of culture, language is possibly the most significant key to generally understand culture, and the specific beliefs, values, opinions and attitudes of a certain individual or group.  All cultures and subcultures must use language to communicate to one another and with other societies.  Language helps in international business transactions; thus, without it, conducting business would be complex (Misra, 2010).  Though many languages can be used for business purposes, English is widely regarded as the language of global business. It is widely accepted as being the language of business, with many international businesses adopting it as their formal language.

As a language of doing business, English has several advantages over other languages; and contains many words, which are drawn from different languages.  In addition, English can be precise and concise, and ideas can be communicated in different ways.  Language instills essential socialization themes, and establishes how norms and values are communicated and expressed. For many companies, such as Toyota, IBM Japan and NEC, the ability to speak English is a condition for promotion. However, it cannot be assumed that speaking similar language can remove cultural differences – it just hides them.  Furthermore, relying on English can weaken people’s ability to adapt to other cultures.  From the viewpoint of global business, it is crucial to have some understanding of the local language.  This helps in understanding one another better, and developing direct rapport with the local population.  The lack of understanding the local language can cost a company dearly. Just as culture is known to be both a dividing and unifying force, so is language.

Norms

These are the societal guidelines and rules that prescribe the suitable behavior for different situations.  Certain norms, called mores are considered to be very important for the smooth functioning and existence of the society.  Violating such norms is regarded as a serious offence and could invite trouble for violators. For instance, in the U.S., business people can hold business discussion with their stakeholders, on a bash where alcohol could be freely served.  However, in a country like Saudi Arabia, doing this could result in punishment for violating a vital norm of the country’s society, which forbids consumption of alcohol.  In many Arab nations, it is regarded as being against the norms to try to shake hands with an individual of a higher authority, unless he or she makes the first gesture.  Foreign nations who violate this are considered to be haughty or rude, and many times, this has caused negative consequences on an organization’s operations involved international business.

Communication

The chances of individuals facing difficulties in understanding one another are quite high especially, when dealing with people from different cultural backgrounds.  In some cultures, for instance, in China, Japan and Saudi Arabia, great emphasis is given to interpersonal relations.  Great care need to be taken, concerning communication, since any sort of misunderstanding can result in end of a negotiation.

Summary and Conclusion

The world economy is experiencing globalization.  For the past few decades, countries have been opening their doors and welcoming alien corporate and multinational organizations from developed countries, as well as emerging economies.  Besides management techniques and skills, these organizations should be culturally sensitive towards the countries they are getting into, in order for them to gain acceptance and build their brands in such countries.  Culture influences just about each aspect of a business, which includes the goals and values of the company, its products, and the ways its workforce communicate with one another. It encompasses all elements of communications, religion, norms, languages, behaviors and values.

Culture symbolizes the manner in which people lead their lives.  For businesses in the international arena, engaging with and understanding consumers, and business partners in diverse cultures is becoming central to business success.  In order to become successful in an international business, individuals and businesses should learn to adjust to cultural differences.  This means that they must become accustomed to different cultural values.  An individual or a business must be willing to adjust to and accommodate other cultures because this is key to succeeding in the international economy. These changes will assist in minimizing the variations that separate cultural groups.

Besides particular organizational cultures, national cultural differences are of concern in the international business.  Different countries have different perception of values, such as, teamwork, different attitudes to procedures and regulations, and perception of time dimensions.  Considering these differences enables people to elucidate the basis of communication, collaboration or management problems, and to decide on the next course of action.  Cultural differences can be aggravating for businesses or organizations.  Non-observance or ignorance of other country’s culture may cause unintentional offence to foreign customers, or social blunders.  Thus, profound understanding of practices and customs, functional in international business is highly important.  Having knowledge for different cultures tends to equip companies to design and fashion their services and products according to the consumers’ needs.

 

 

 

References

Cherunilam, F. (2010). International business: Text and cases. New Delhi: PHI Learning Private Limited.

Dlabay, L. & Scott, J.C. (2010). International Business. CengageBrain

Ferraro, G.P. (2002).  The cultural dimension of international business. The University of North Carolina. Available from: http://www.petronet.ir/documents/10180/2323250/the_cultural_dimension_of_international_business

Feldman, M. P., Santangelo, G. D., & European International Business Association. (2008). New perspectives in international business research. Bingley, UK: JAI Press.

Keillor, B. D. (2013). Understanding the global market: Navigating the international business environment. Santa Barbara, Calif: Praeger.

Morrison, J.  (2008). International Business: Challenges in a Changing World. Palgrave Macmillan

Misra, S. (2010). International business: Text and cases. S.l.: Prentice-Hall Of India.

Neelankavil (2015). Basics of International Business. M.E. Sharpe

Shenkar, O. Luo, Y. & Chi, T.  (2014). International Business. Routledge

 

 

 

 

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